The ratings on Southern Natural Gas Co. (SNG), a subsidiary of El Paso Corp., are based on the credit quality of the consolidated entity. Thus, the ratings on SNG are expected to mirror those of El Paso. The ratings on El Paso continue to be pressured by onerous debt leverage, ongoing refinancing risk due to large near-term debt maturities, and the challenges the company faces in executing an aggressive operational restructuring. Among the most important aspects of El Paso's restructuring is the rehabilitation of its exploration and production (E&P) operations. This unit has been plagued by aggressive reserve booking policies, very high finding and development costs and extremely short reserve life. El Paso will also need to continue to divest
